Hypermarcas gets US$170m for food, cleaning brands

Reuters and Bloomberg,
SAO PAULO, BRAZIL

Hypermarcas, the largest Brazilian maker of disposable consumer goods, raised 305 million reais (US$170 million) from the sale of food and steel wool brands, the company said on Saturday, as part of plans to focus on more profitable businesses.

Concerns that Hypermarcas is overstretched and loosely focused have driven a 60 percent tumble in its stock this year. Investors are pressing management, led by Hypermarcas chief executive Claudio Bergamo, to divest some of the company’s more than 200 brands and integrate more rapidly some of the firms it has gobbled up over the past four years.

Bergamo said in a written statement that the sale of Assolan and the tomato brands concluded the company’s cycle of asset sales in its food and cleaning lines and that it would now focus on its more profitable pharmaceutical and personal hygiene segments.

Yet disposing of brands at such a pressing time is complicated, and investors worried bidders had underpayed for the assets. Some analysts had previously valued Assolan’s brand and assets at between 300 million reais and 400 million reais.

Some investors fear Bergamo would have to integrate the 30-plus takeovers of recent years and cut debt in a much tougher economic environment.

In October, Hypermarcas sold powdered soap, insecticide and detergents brands to local home cleaning goods producer Flora for 140 million reais.

The Sao Paulo-based company’s woes highlight just how quickly confidence in Brazil’s economy is eroding as years of fast growth show signs of strain.

Brazil’s economy, the world’s second-largest emerging market, contracted for the first time in more than two years in the third quarter as Europe’s debt crisis deepened and growth in China slowed.

GDP shrank 0.17 percent in the three months ending in September on an annualized basis.

To reinvigorate the US$2.1 trillion economy, the central bank has cut its benchmark interest rate three times since August, pushing it to 11 percent. The government also stepped in last week to defend growth, slashing 2.8 billion reais (US$1.6 billion) in taxes, including levies on flour, wheat and pasta, as well as rolling back a tax on foreign purchases of stocks and bonds.

Moreover, tax cuts on consumer loans, home appliances and food staples announced on Dec. 1 were “narrowly focused” to help companies and retailers reduce inventories and pose no threat to the government’s fiscal target next year, Brazilian Deputy Finance Minister Nelson Barbosa said on Friday.

Barbosa said that the steps taken, including targeted tax breaks for industry earlier this year, should be enough for Latin America’s biggest economy to regain its footing and grow at least 4 percent next year.

However, economists are skeptical the government will meet its growth target and expect GDP to expand no more than 3.5 percent next year.

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